Settlement Requires the Sale of 91 Dialysis Clinics and Interest in 12 More in 66 Areas Across the United States
Fresenius AG will sell 91 outpatient kidney dialysis clinics and financial interests in 12 more to settle Federal Trade Commission charges that Fresenius’ purchase of rival dialysis provider Renal Care Group, Inc. would violate federal antitrust laws. When the deal is finalized, Fresenius will be the largest provider of outpatient dialysis services in the United States.
“Competition lowers costs and increases choices for consumers,” said Jeffrey Schmidt, Director of the FTC Bureau of Competition. “It’s especially important that consumers have choices when it comes to life-saving medical treatments involved in transactions such as this one. The rising cost of health care services is a significant concern. The consent agreement announced by the Commission today will protect consumers from the higher prices for dialysis services that likely would have resulted from the proposed acquisition.”
The German firm Fresenius AG, and the companies it controls, including Fresenius Medical Care AG&Co. KGaA; Fresenius Medical Care Holdings, Inc.; and Florence Acquisition, Inc., proposed to acquire RCG for approximately $3.5 billion. In 2005, Fresenius had revenues of approximately $4.1 billion from providing outpatient dialysis services to about 89,000 renal disease patients at about 1,155 outpatient dialysis clinics nationwide. RCG, based in Nashville, Tennessee, is the third-largest provider of outpatient dialysis services in the United States, with approximately 450 clinics serving more than 32,000 patients. In 2005, RCG had earnings of $1.5 billion providing dialysis treatment.
According to the FTC’s complaint, most end-stage renal disease patients require dialysis three times a week, in sessions lasting between three and five hours each. For patients with ESRD, dialysis treatments replace the lost function of their kidneys by removing toxins and excess fluid from their blood. The only alternative is a kidney transplant but wait time for donor kidneys can be several years, and some patients are not viable transplant candidates. Dialysisservices are local in nature because most patients are unwilling or unable to travel long distances for the service. With few exceptions, the 66 outpatient dialysis markets identified by the Commission have no more than one significant dialysis provider other than Fresenius and RCG.
Prior to the merger, Fresenius and RCG competed in these markets and health plans and others who pay for treatment benefit from that competition when they are negotiating the rates of the dialysis provider. According to the Commission’s complaint, the proposed acquisition likely would violate federal antitrust laws and result in higher prices and reduced incentives to improve service or quality for outpatient dialysis services in the 66 markets identified in the complaint. Entry into local markets for outpatient dialysis services, on a level necessary to deter or counteract the anticompetitive effects of the proposed transaction, is not likely to occur in a timely manner. In each of the markets identified in the Commission’s complaint, such entry would be unlikely due to several factors, including the difficulty in attracting nephrologists with established patient pools who are willing and able to serve as clinic medical directors.
The consent agreement would remedy the illegal anticompetitive effects of the acquisition, by requiring that Fresenius sell 91 outpatient dialysis clinics and RCG’s joint venture equity interests in 12 additional clinics to National Renal Institutes, Inc., a wholly-owned subsidiary of DSI Holding Company, Inc.
To ensure that NRI can provide robust competition, the settlement:
- requires that Fresenius obtain agreement of doctors and lessors of the divested clinics to continue to provide service under the new NRI management;
- requires that Fresenius provide NRI with the opportunity to interview and hire employees affiliated with the divested clinics and prevents Fresenius from offering the employees incentives to decline NRI’s offer of employment;
- restricts Fresenius from contracting with the medical directors of the divested clinics, or their practice groups for three years;
- requires Fresenius to provide NRI with a license to Fresenius’ policies and procedures, as well as the option to obtain Fresenius’ medical protocols, which will enhance NRI’s ability to provide continuity of care to patients.
The consent agreement also contains a separate order to maintain assets that will ensure that the assets to be divested remain viable and competitive pending their sale to NRI. Fresenius and NRI have agreed that Fresenius will provide transition services to the NRI clinics for 12 months to ensure continuity of patient care and records as NRI implements its quality care, billing, and supply systems. The settlement also requires Fresenius to provide prior notice of any planned acquisitions of dialysis clinics located in the 66 markets addressed by the consent agreement.
The Commission vote to accept the proposed consent agreement was 5-0. The FTC will publish an announcement regarding the agreement in the Federal Register shortly.
The agreement will be subject to public comment for 30 days, beginning today and continuing through May 2, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, Room H-135, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.
The FTC’s Bureau of Competition, in conjunction with the Bureau of Economics, seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail: firstname.lastname@example.org; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.
- Media Contact:
Claudia Bourne Farrell
Office of Public Affairs
- Staff Contact:
Gary H. Schorr,
Bureau of Competitionl